Securing client business with insurance

By Rudy Mezzetta | Wednesday May 31, 2017

Study shows that Canadians who own insurance products tend to be more loyal to their advisors

Canadians who own life insurance and related products are less likely to consider changing financial advisors than clients who don't have insurance but work with an advisor, according to recent research conducted by Mississauga, Ont.-based Credo Consulting Inc.

As well, owners of insurance products are much more likely to ascribe positive attributes - such as "professional," "trustworthy" and "dependable" - to their advisors than are Canadians who do not own those products.

"If you [as an advisor] can connect with people on an insurance level, then you will secure all the business [of that client]," says Jim Ruta, president of AdvisorCraft Media and Consulting in Toronto and a video columnist for Investment Executive (IE). "There's no question in my mind."

Among Canadians surveyed by Credo and who work with advisors, those who own insurance gave an average score of 2.5 out of 10 to the statement: "I am considering finding a new financial advisor." In comparison, surveyed Canadians who have an advisor but don't own insurance gave an average score of 3.3 out of 10 to the same statement. The "loyalty gap" between insured clients and uninsured clients remained relatively consistent at all income levels among survey participants.

These are some of the findings of the most recent edition of the ongoing Financial Comfort Zone Study, a national consumer survey conducted by Credo in partnership with Montreal-based TC Media's investment group. (TC Media publishes IE.)

The results of the survey suggest that advisors with clients who have insurance products tend to establish deeper relationships with those clients, Ruta says: "Life insurance, and all the related products you can sell with a life insurance licence, is a much more personal purchase for the client."

Advisors who raise the issue of insurance with their clients must broach topics such as disability, mortality and a client's desired legacy, topics that typically are among the toughest for clients to consider, says Heather Clarke, vice president of I.G. Insurance Services Inc., a subsidiary of Investors Group Inc., in Winnipeg. If that discussion is handled with proper care and professionalism by the advisor, it can lead to a closer bond between client and advisor.

"Your relationship becomes strengthened as you ask those difficult questions of your client," Clarke says. "And your client has to reveal things to you that perhaps they haven't revealed to anyone else. And so, that helps solidify the relationship, for sure."

The investment side of clients' portfolios tends not to hit the same emotional chords for clients as insurance does, Ruta says. Asking clients a question such as,"What hopes do you have for your family when you're gone?" when discussing life insurance engages clients in a way that discussing issues such as saving up for a new car doesn't, says Ruta: "That process of engagement [that comes with selling] insurance just never comes up [when discussing other investments], never gets that personal, never elicits the same emotion from people."

Insurance traditionally is a tougher sell than other investments, Clarke says. For one thing, insurance doesn't seem as "tangible" for people as other investments are: "Nobody wants to spend money on insurance premiums. With term insurance, for example, once you pay the premium, [that money] is gone."

You usually must be proactive in raising the topic of insurance with your clients, unlike when discussing other investments, Clarke says: "I don't think there are a lot of people who are going to wake up and say, 'I think I need some [life] insurance. I'm going to go online and buy it myself.' It's not mandatory, like auto insurance is."

But if you can connect with your clients regarding insurance, you are both securing your clients' financial future and increasing the chances that the relationships with those clients are longer-lasting, Ruta says: "When you sell insurance, you will know your client better than any other financial practitioner does - and that's a big deal. There will be limited interest on that client's part in going anywhere else."

Adds Clarke: "Any financial planner will tell you that risk protection is the foundation of a financial plan. And without [that protection], the best plan in the world can be derailed by disability or death. So, I think advisors who are not insuring that their clients' risk protection needs are taken care of aren't really doing financial planning."

Once you establish a relationship with a client that includes a risk-management component, having followup discussions regarding additional insurance needs becomes easier, thus deepening the relationship.

"If I [as a client] trust you enough to give you my investments and insurance [business], then obviously I do think you're more trustworthy and professional," says Sara Gilbert, founder of Strategist Business Development in Montreal. "It comes back to loyalty. From a behavioural standpoint, the more services a client has with one person, the more loyal that client will be."

Among survey participants who work with an advisor, 62% who have life insurance described their advisor as "professional," vs 52% of survey participants who work with an advisor but are without insurance. In addition, 51% of survey participants with life insurance described their advisor as "trustworthy," vs 43% of those without insurance. Also, 46% of survey participants with life insurance described their advisor as "dependable," vs 38% of those without insurance.

The online Financial Comfort Zone Study has polled 18,000 Canadians thus far. The survey is meant to gain insight into the relationships among financial advice, financial well-being and overall life satisfaction in Canadian society. Canadians are polled monthly, and the number of survey participants will increase each month.